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Primark benefits from cash-strapped shoppers leaving M&S in the shade
4:31pm Tuesday 5th November 2013 in Business
WHILE Marks & Spencer has now recorded more than two years of falling fashion and homeware sales, budget retailer Primark has been on a rocketing trajectory as its fast fashion wins over cash-strapped shoppers.
Analysts said Marks & Spencer's clothing performance struck a "complete contrast" with Primark.
Total sales at Primark leapt 22% to £4.3 billion in the year to mid-September and stripping out new store openings were up 5% on a like-for-like basis.
But 129-year-old M&S, which sells clothing, footwear and homewares from 340 UK stores, said like-for-like general merchandise sales slumped 1.3% in its July to September quarter. That was its ninth consecutive quarter of falling clothing sales.
Neil Shah, analyst at Edison Investment Research, said: "Consumers are still being hit hard on their discretionary spend which is why Primark is benefititng.
"Primark gave M&S a harsh lesson in the need to be faster at adopting fashion trends if a large clothing retailer is to take market share."
Primark has expanded rapidly since opening its first store in Dublin in 1969. The chain, owned by conglomerate Associated British Foods, now has 257 stores including 161 in the UK, after opening 16 during the year.
M&S also opened a net 16 new stores in the UK during the half, including five food stores, to give it almost 770 stores. But it is largely concentrating on revamping its existing estate of clothing stores to lure in shoppers.
Including new openings, M&S's total UK general merchandise sales were up 0.4% during the six months to the end of September to £1.9 billion - making up about 40% of the group's turnover.
Retail consultancy Verdict sees M&S's share of the UK clothing market dipping to 9.9% this year from 10.1% last year, continuing a fall seen in recent years.
But it expects Primark to grow its share of the clothing market to 6.9% from 6.4% in 2012.
Verdict analyst Sarah Peters said there is a "complete contrast" between the retailers' performance, with Primark's lower prices only partly responsible.
"Price is a big appeal but customers are willing to pay for things if they are a bit more expensive and offer good value," she said, citing Next and John Lewis as retailers which have done well amid the tough climate.
"M&S has struggled in clothing for some time and has put in place a strategy to try to solve its issues but that has not come through yet," she said.
"M&S is struggling to establish what consumers want. The third quarter (October to December), that's going to be the real turning point for M&S as to whether it's actually working.
"Primark has got a very clear strategy in terms of its products. Yes, it's value, but it offers a mixture of trend and classic clothing. It's really established itself as a destination on the high street. It offers value to customers."
Ms Peters said M&S's challenge is to attract fashion-led younger shoppers as well as appeal to its core over-50s market.
She said the chain is trying to become more responsive to fashion trends with quicker lead times, a strategy which Primark employs successfully - adding M&S cannot rely on new stores to drive growth as it already on most high streets.
"Primark is known for its fast response time," she said. "It's very quick to get things onto the shop floor. It buys in bulk and sells in bulk. That's the essence of their model."
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